Any person who willfully fails to keep records, supply information, make a return or pay tax and who is required to do so commits misdemeanor punishable by up to one year in prison and/or fine of up to $25,000 ($100,000 for corporations). The statute of limitations for failure to file returns or pay tax is six years and the limitations period for failure to keep records or supply information is three years. The statute above does not apply to a failure to pay estimated tax if there is no penalty for underpayment of estimated tax by individuals or corporations.
The statue applies to officers or employees of a corporation, members or employees of a partnership, who, in their capacity as officers, employees, or members, are under a duty to perform an act to which a violation occurs. Thus, when a corporation or partnership is under a duty to file a return and the individual responsible for the filing willfully fails to file the entity's return, the individual may be subject to prosecution under this statute. The failure to timely file an income tax return is the most common charge brought under this statute.
Failure to Make Return
To prevail in a failure to make a return case, the government is required to prove beyond a reasonable doubt that the defendant:
- was required to file a return
- failed to file the return within the time required by law
- acted willfully
A taxpayer must make an honest and genuine effort to satisfy the applicable tax law, thus, even through the proper tax forms may have been filed, they may not be considered a return if sufficient information was not supplied. Failure to file a return may be proved by taxing authority testimony that a diligent search failed to discover the return in question. Willful failure to file a return does not by itself constitute an attempt to evade tax. Failure to make a return can be mitigated by making a voluntary disclosure of the failure to the IRS prior to the commencement of criminal prosecution or investigation. The IRS has historically passed on prosecuting the vast majority of taxpayers who have made proper voluntary disclosures.
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